Lecture 8.docx

Lecture 8 - Success in Development (the case of east Asia)
October 29 , 2013
What generates industrialization and economic growth?
Why does it happen in some places and not in others?
What accounts for different outcomes in different parts of the world?
- The market
o Drives the market because of the nature of human beings
o Need for agricultural foundation
o Driven by the profit motive (accumulate wealth)
o Development is driven by private people who invest because they expect they will make
a profit
o Works through the invisible hand of the market (Adam smith) the law of supply and
demand
 Supply will rise and fall to meet demand
 Supply follows demand
o Be careful not to overstate the degree to which the market is independent to state
intervention
o State intervention
 To secure private property
 To secure intellectual property
 To ensure a supply of capital
o The state does not drive the market but creates background
- Structure (state and political institutions)
o Nothing natural about the market (exchange for profit, labour, completion)
o The market is the result of self-conscious and often violent intervention of the
government and resistance of the people
o No invisible hand
o Something that is created on purpose by the government coercive forces
08/09 – do we let the market deal with it or let the state intervene (the global financial crisis)
- Market
o Let the companies go bankrupt
o State cannot intervene to rescue companies that will go bankrupt
- General agreement that state should intervene minimally
- 08 how much state intervention is required in the market
- Explicit – the difference between ideologies of market intervention by the government/state
- Left – markets should be guided regulated (think the state is guided by the public interest)
(market driven by the profit want market to be driven by something/someone who has the
public interest in minf) Lecture 8 - Success in Development (the case of east Asia)
October 29 , 2013
Structural Approach
- China’s great leap forward
- German industrialization under Bismarck
- Soviet Five year plans
- Japanese MITI and plan ration economy
- Singapore
Structural Approach
- State sets prices, protect enfant industries, intervenes at every step to do what the market is
supposed to accomplish naturally
- Difference of timing between structural and market approach
o Later developer (disadvantage – face greater competition) (France and Germany)
- Developmental states (take lead in development)
- State intervene to produce market and development
France
- Early developmental state
- Natural difference between Britain and France
o Small population and low population growth (no agricultural revolution, small labour
force) (Britain had large population and large population growth)
- Social and political
o France regional segregated markets (small – isn’t trade all throughout the country)
(wasn’t capital to finance projects) (less social mobility)
- Much more state involvement
o By financing
o By securing/protecting market
Germany
- First had to consolidate the state
- Small regional markets and internal tolls
- No agricultural revolution
- Little social mobility
- Small labour force
- Eventually consolidate by abolishing internal taxation
- Also had coal and iron (rail road was planned and financed by the government unlike Britain and
more like France)
Singapore
- Obstacles
o No resources Lecture 8 - Success in Development (the case of east Asia)
October 29 , 2013
o Small domestic market/small population
o High tariffs from |Malaysia against Singaporean go